For most of us, our home is the most valuable asset in our portfolio, so mortgage decisions shouldn’t be made lightly. Refinancing is essentially paying off your existing mortgage by creating a new one. Why might you want to do that? According to The Federal Reserve Board…
It’s a good idea if you wish to:
- Lower your interest rate
- Increase or decrease the length of your mortgage
- Change from an adjustable-rate mortgage to a fixed-rate mortgage
- Negotiate an adjustable-rate mortgage with better terms
- Get cash from the equity built up in your home
It may not work for you if:
- You’ve had your mortgage for a long time
- Your current mortgage has a prepayment penalty
- You plan to move in the next few years
Keep in mind that if you choose to refinance, you must first get approved by a lender, who will review your income, credit score, debts, assets, and the current value of your property. Also remember that fees, rates, and terms differ from lender to lender, so be sure to do your homework and shop around.
For information on refinancing a mortgage, talk with your bank or financial advisor, or get a copy of The Federal Reserve Board’s free “A Consumer’s Guide to Mortgage Refinancings,” which is available in print and via their website, at www.federalreserve.gov/pubs/refinancings.